The U.S. Small Business Administration issued a one-page application form that aims to simplify the application process for the forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to meet the requirements of the latest stimulus legislation.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion in funding for small businesses seeking forgivable loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The legislation required that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This is to make it easier to apply for forgiveness. It also included conditions that encourage banks in the community to lend more particularly to minority-owned businesses who were unable to obtain loans in the past.
“The Small Business Administration met the requirements to release the single-page form for loan forgiveness under the PPP within 24 days of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued additional updated forms.”
First Draw PPP Conditions for loan forgiveness
Loan Forgiveness Income – First Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8-to 24-week covered period following the loan’s disbursement
- Employee and compensation levels are ensured
- The loan proceeds are used on payroll costs and other eligible expenses; and
- At least 60% of profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24-week time period after the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the identical manner.
- The loan proceeds can be used to pay expenses for payroll or other eligible expenses.
- At least 60% of proceeds go to payroll costs
- How to apply for loan forgiveness , and the time to apply
After all loan funds have been utilized the borrower is eligible for forgiveness. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 month after the date they will be able to repay the loan are able to receive loan payments from their PPP lender.